FuelEU Maritime. What it means for shipping.

FuelEU Maritime applies to vessels over 5,000 Dwt which call at EU/EEA ports. It includes 100% of voyages within the EU/EEA, and 50% of voyages to or from the region.

Emission reduction targets are progressive, aiming to reduce shipping's yearly average GHG intensity of energy used per vessel, which is measured as emissions per energy unit (gCO2e/MJ) on a Well-to-Wake (W-t-W) basis.

Compliance

Who? The Document of Compliance (DOC) holder, the ship manager, is solely responsible for FuelEU compliance. The incremental reductions begin with a 2% GHG energy intensity reduction in 2025, using a 2020 baseline of 91.16 gCO2/MJ. Reductions then increase to 6% from 2030, 14.5% from 2035, 31% from 2040, 62% from in 2045, and 80% by 2050.

When? Shipping companies must submit a FuelEU monitoring plan. Beginning 1 January 2025, the data must be recorded and 2025 emissions must be verified by 31 January 2026.

How? Considering which action to take as a ship manager depends on the availability of the fuel mix, access to compliance pools, or whether to pay the penalty.

1. Fuel Mix Transitioning to low-carbon fuels, such as biofuels or LNG, can reduce GHG intensity. Shore Power: Using shore power when docked can minimize onboard fuel consumption and emissions. Wind-Assisted Propulsion: Installing wind-assist technologies, such as suction or rotor sails, can cut fuel use, contributing to reduced GHG emissions.

2. Technical mechanisms Banking, Pooling, or Borrowing: These mechanisms allow for strategic management of emissions allowances. Operators with surplus allowances can bank them for future use or pool them, while those facing deficits can borrow allowances to avoid penalties.

3. Pay the Penalty When alternative fuels or technology investments are not viable, evaluating the cost of non-compliance penalties may provide a stopgap measure. Penalties are priced are initially at €2,400 ($2,500) per tonne of very low sulphur fuel oil used over the limit, which will be increased if penalties are incurred in consecutive years.

Looking ahead. Regional regulations, such as in the EU, impact the global industry. Maritime actors are calling for a standard globalised regulation from the IMO to create a level playing field in the effort to decarbonise the industry. The high costs from the green transition translates to higher transport costs. Parties need to coordinate on operational decisions that affect emissions and carefully review contracts. Contracts need to determine allocation of benefit for surplus emissions credits and how penalties will be shared.

BIMCO has published its FuelEU Maritime Clause for Time Charter Parties 2024 which has been designed to align contractual frameworks with the upcoming regulation, with more details to come from the EU as the industry adjusts to the new regulation.

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